Socialist economies in Eastern Europe have collapsed and em-barked upon market-oriented reforms. The causes of thedemise of centrally planned economies are analyzed and thebasic challenges of systemic tranformation discussed. Negative income and wealth effects as well as distributionissues make adjustment extremely difficult. The fundamentalroles of privatization and foreign investment are adressed. Foreign economic liberalization is considered to be ofcentralimportance for a growth-oriented adjustment path ina stage of conflict-prone policy and options. Politico-economic aspects of the new European developmentsin addition to North-South issues are analyzed. Difficultchoices await decison-makers in economic policy and thebusiness community in Eastern Europe and in leading marketeconomies.
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